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How Health Care Spending Soared by $1 Trillion in 10 Years

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Health care spending per person for Americans with employer-provided health insurance rose by 44 percent, or 4.1 percent a year, from 2007 through 2016, according to a new study in Health Affairs. That's an increase from $3,752 to $5,394 per person — and it doesn’t include premiums.

Adjusting for inflation, the spending increase is only about half as large, but still significant at 23 percent.

Annual spending growth averaged 6 percent from 2007 to 2009 then slowed to 3.2 percent for five years in the wake of the Great Recession before climbing to 4.4 percent a year between 2014 and 2016.

The growth in spending occurred across all categories of health care. Outpatient services accounted for the largest increase, growing by 64 percent over the decade (or 40 percent after adjusting for inflation.) Out-of-pocket spending grew by 43 percent, or an inflation-adjusted 22 percent. Surprisingly, though, given the rise of high-deductible health plans, out-of-pocket spending as a share of total spending was relatively unchanged — though the mix of services people paid for shifted somewhat from prescription drugs to outpatient and other services.

Similarly, a new report from the Centers for Disease Control and Prevention says that personal health care spending — defined as “outlays for goods and services relating directly to patient care” — overall grew from $1.8 trillion to $2.8 trillion between 2006 and 2016. Those numbers aren’t adjusted for inflation, but again, making that adjustment still results in a sizable increase.

Here’s a breakdown of average annual growth in personal health care spending by payer (you can find more details and data here):

Medicaid (federal): 7 percent

Medicare: 5 percent

Private health insurance: 4.6 percent

Medicaid (state) 4.3 percent

Out of pocket: 2.6 percent

Private health insurance accounted for the largest portion of the spending, $994 billion as of 2016, followed by Medicare ($625.3 billion) and Medicaid ($505.2 billion total).

As editor in chief, Yuval Rosenberg oversees all aspects of The Fiscal Times' website and email newsletter. His writing has appeared in publications including BusinessWeek, CNBC.com, CNNMoney.com, Fast Company, Fortune, Newsweek, Money and Time.